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This is what the markets are looking for from the Fed Wednesday

  • Minutes from the Fed's last meeting could help further the debate on whether low inflation is transitory or some bigger concern for the economy.
  • Tuesday's surprise jump in July retail sales suggests that the consumer is stronger than expected and inflation could begin to rise again.
  • Target, LBrands and Cisco are among companies reporting earnings Wednesday.
Traders and financial professionals work on the floor of the New York Stock Exchange (NYSE).
Drew Angerer | Getty Images
Traders and financial professionals work on the floor of the New York Stock Exchange (NYSE).

The big deal for markets Wednesday could be the minutes from the Fed's last meeting, if they include any fresh insights on inflation.

That's because the recent string of weak inflation data has raised serious doubts about whether the Fed can raise interest rates again this year, as it has forecast. Fed officials have termed the slowdown in inflation both a concern and transitory.

The minutes, released at 2 p.m., could provide some insight into the view on the Federal Open Market Committee.

The minutes come a day after July's strong retail sales report signaled that the consumer is not weakening, so inflation may start to pick up. Retail sales rose 0.6 percent in July, the best gain in seven months. Positive revisions were also made to June's report.

"I think the market is anticipating a relatively hawkish Fed with a focus on the optimistic growth picture and a continued emphasis on the softer inflation trend," said Ian Lyngen, head of U.S. rate strategy at BMO.

But Lyngen said the Fed's not likely to be definitive on the inflation question. "I don't think this is the time when they're going to say this is something cyclical or coincidental," he said, adding it could sound more dovish than expected.

Some Fed officials have said the central bank can afford to be patient, signaling the market a third rate hike might not be coming this year. But others have stressed the Fed can hike rates, such as closely watched New York Fed President William Dudley.

Besides the Fed minutes, there are housing starts and the business leaders survey at 8:30 a.m.

Earnings are expected from Target, Tencent, Pershing Square Holdings and Performance Food before the opening bell. Cisco Systems, L Brands, NetApp, and CACI International report after hours.